How do you manage accounts payable effectively?
Introduction
Today's business environment is asking people to do more with less, and every industry is under pressure. Businesses do not miss opportunities to free up working capital. Strategies must be developed to increase the availability of cash trapped in the balance sheet. Develop the extra liquidity needed to streamline processes, finance growth, improve services, reduce costs and capture new investment opportunities. It all starts with effective account payable management.
What is Accounts Payable Management?
Accounts Payable Management is the management of a company's outstanding liabilities to third party vendors for credit purchases Accounts payable management includes finding trade credit lines, obtaining favourable purchase terms, and managing the timing and flow of purchases.
All AP process management is done to effectively control the company's working capital.
The short-term liabilities section of the balance sheet is where accounts payable should be. It primarily includes short-term financing of incurred costs, inventory purchases, and other valuable short-term activities
How to effectively manage accounts payable
Accounts payable is the department responsible for the core activities of a company. Managing your invoices effectively is critical to maintaining strong relationships with suppliers and getting the most out of your working capital. Here are our top tips for effectively managing your accounts payable.
The high-stakes process navigated through the Accounts Payable department requires efficient management. Because Accounts Payable is responsible for prompt and accurate payment of all incoming invoices, its ability to function effectively has significant advantages over a range of other areas of operation Better adherence to established best practices in the accounts payable process can help improve relationships with key suppliers, better use of working capital and prevent fraud, all of which have a clear impact on bottom lines.
But what AP departments do isn't always easy, and the complexity of the processes they navigate every day makes it easy for inefficiencies to go unnoticed and escalate. There are many ways to make your Accounts Payable processing in Chicago more efficient, including the use of AP automation, but here we focus on more effective account payable management efficiencies in bringing about positive change.
Three Tips to Improve Accounts Payable Management
The good news for finding ways to better manage payable accounts is that there are small tweaks companies can use quickly, and simple common sense accounting tricks can be transformed in no time Here are three things
1. Know your vendor from the point of onboarding
Frankly, payout teams often get to know vendors well by the end of the B2B payments process, but not always for the best reasons.
It's often a non-stop parade of vendors asking AP staff where the money is and when they can get it. It's no fun for anyone, especially an underpaid clerk who spreads bad news about the company to a disgruntled supplier.
A smart move is to start a more proactive conversation with the seller This can be done by establishing clear payment terms between all parties and by training AP staff in advanced communications skills It can also be done using AP automation software that prioritises communications, such as Stamplys Collaboration Hub, as part of a broader invoicing management solution that “connects all stakeholders with contextual, unified communications above the invoice.”
2. Capture small invoices to pay in bulk
On the one hand, it can be beneficial for companies to collect as few invoices as possible This means that every invoice your company receives is captured by your accounting software This can be a bit tedious, especially when done manually However, this is something that needs to happen so that your invoice doesn't slip through the cracks However, it makes little sense for accounts payable clerks to plan a few payments at once when the invoices are already in the company's Accounts Payable processing in New York.Grouping separate checks or electronic payment runs such as Automated Clearing House (ACH) is costly. Processing bulk invoicing payments makes a lot of sense
(providers should also be mindful of fraud issues with lump sum payments)
3. Empower sellers and save company leaders time
With a well-designed self-service portal like Stamply's supplier portal, suppliers are empowered to update their payment information and know the status of their payments. This makes the invoice approval process as smooth as possible, freeing company leaders to spend their time on higher-level issues.
Even if AP isn't ready to start automating, it's wise to do everything it can to protect executives in the payment process and help vendors sort things out on their own Automation may be necessary for companies that want to learn how to manage their accounts of payments in the most efficient way.
Benefits of Accounts Payable Management
Organisational change is easy, but building a working capital culture is essential. For small businesses, this can be a significant advantage. Improving the debt process increases the accuracy of cash flow forecasting This can help the Accounts Payables department set a better budget and ultimately improve the company's liquidity It also helps bridge the funding gap and generate higher returns
The insights gained from effective accounts payable management can help you strengthen your bargaining power and work with better suppliers. A better use of company cash means extended payment terms, extended warranties or special holds on inventory.
Conclusion
Successful Accounts Payable departments work with automation and understand the implications of strong Business Accountants relationships It's not enough just to pay the vendor You must work with your supplier The better you deal with suppliers, the better deals you get It's very simple
After that, your best bet is to find the right accounting software for your business and explore the different ways to optimise your account payable process. Then double your working capital. Ready to learn more about AP automation? For case studies, guidance, and answers to all
your questions, check out our latest eBook: Leading Companies Power Accounts Payable with Automation